Swiss Re’s senior risk manager advises underwriters to not be ‘scared’ of providing cover for carbon removal

The insurance industry is “perfectly positioned” for “action” to support global carbon dioxide removal and the transition to a net zero economy by following a three-pronged “theory of change” model, according to Mischa Repmann, a senior risk manager in the sustainability team at reinsurer Swiss Re.

Speaking during a webinar hosted by carbon dioxide (CO2) air capture technology firm Climeworks on 28 November 2022, Repmann outlined the approach that Swiss Re had taken in scaling its CO2 removal work and explained how this overarching model could be applicable for all insurance businesses.

The first pillar of Repmann’s three-stranded strategy is de-risking operations, for example by engaging in long-term CO2 offtake agreements.

This type of de-risking can utilise nature-based solutions – such as planting trees and land management – or technical solutions, like air captured CO2 or bioenergy, Repmann explained.

Insurers specifically can also support the de-risking process for other industries by looking at insurance covers and engaging in more “novel” lines of business, such as climate liability or stored carbon.

Repmann’s second pillar is financing, so investing in suppliers and providing grants, for example. Although this is the smallest of the three areas where Repmann feels insurers can have an impact, this pillar is still important because it can plug a current investment gap.

He said: “Investors are reluctant towards new technologies - there are technical risks. There are commercial and market risks.”

The last pillar of Repmann’s strategy is buying. This includes buying “carbon removal services” and “carbon avoidance certificates”.

The reason why the insurance sector be so impactful in driving the transition to a net zero economy is because it can participate in all three of these areas that Repmann discussed during the webinar.

Repmann noted that other industries “aren’t that well positioned” and “can maybe do buying, maybe a little bit of investing” – but the insurance sector “can really do all three”.

“Insurance is perfectly positioned not only for quorum removal, but for action,” he said.

Novelty factor

Breaking down new climate-related risk areas for underwriters in order to facilitate the de-risking pillar of this strategy is a current challenge, Repmann added.

He emphasised that “key insurance opportunities” for carbon removal processes are already available – for example, “property to casualty covers, to credit [insurance], engineering covers [and] marine transport”.

Repmann continued: “This is not rocket science or brand new. There are industries for all these processes that resemble things [underwriters have] already done, already underwritten. So don’t be scared.

“There is only one real novelty here, which is stored carbon. And eventually what do we do with stored carbon? Are we in the position to place insurance products for that?

“If we go to the new removal market and engage early in removals or in any climate solutions, we become a credible partner. And then we can bring our investors, our asset managers and underwriters to the same table. That’s how we could make it interesting [and] start something from operations.”

The webinar also featured Laurent Muller, sales manager at Climeworks, and chair Robert Hoglund, a self-employed climate advisor.